Africa’s biggest bank building an insurance giant

Standard Bank plans to turn Liberty into one of the largest insurers in South Africa and the continent by leveraging its banking channels to cross-sell insurance products. 

Founded in 1957 when Sir Donald Gordon sold the first-ever retirement annuity in South Africa, Liberty’s early decades were marked by tremendous innovation. 

Aside from selling the first retirement annuity in South Africa, Liberty also introduced the first unit trust and was the first insurance company to link life insurance benefits to unit trusts. 

Liberty was also the first life assurance company to list on the JSE in 1962. The company reached a peak in 1992 when it was the fifth largest company in South Africa. 

Gordon’s retirement in 1999 would bring significant changes to Liberty, with the Standard Bank of South Africa taking control of Liberty Life. 

This marked the beginning of the company’s relationship with the bank, which has fluctuated in recent years. 

Liberty’s relationship with Standard Bank has been extremely close at times and distant at others. 

In recent years, the bank’s leadership looked to bring this to an end by buying out the minority shareholders in Liberty and making the insurer a wholly-owned subsidiary of Standard Bank.

This was completed in 2022, with the institutions solidifying their strategic relationship and creating a fully integrated financial services provider. 

“We are creating a more united group that will bring our banking, insurance and asset management businesses much closer together to create something really special,” Standard Bank CEO Sim Tshbalala said at the time. 

“This will be a whole that will be much greater than the sum of its parts.”

The deal had obvious benefits for both parties. The bank can reduce its reliance on lending for its earnings and thus its sensitivity to interest rates, while the insurer has access to Standard Bank’s substantial distribution channels. 

Much of the focus has been placed on the benefits of Standard Bank bringing Liberty’s asset management business, including Stanlib, under its roof. 

Asset management is a particularly attractive and lucrative part of being a full-service financial institution. It is capital-light and offers high-quality earnings with a higher return on equity than traditional banking activities. 

Furthermore, the earnings volatility in the asset management business is relatively low compared to banking and is thus deemed higher quality. 

In a recent interview with Daily Investor, Liberty’s head of South Africa Retail Life and Savings, David Jewell, explained how the insurer plans to make the other half of this equation work. 

For Jewell, the bank and the insurer are two sides of the same coin, with both looking to cross-sell their products through the others’ distribution channels. 

“If you are a Standard Bank client, then you can obviously access all the banking solutions on a single platform. What we are driving now is enabling you to access insurance products on that platform,” Jewell said. 

At the same time, Liberty has enabled its advisors to offer insurance clients access to Standard Bank’s banking products. 

“I think we are starting to see some really interesting green shoots in progress regarding that greater cohesion and integrated strategy,” he said. 

However, it has proven more difficult than some expected to bring insurance products onto Standard Bank’s banking platform. 

Some products, like funeral cover or life insurance, are relatively simple and can be modified to be ‘sold’ on a digital platform. 

Others require more detailed tax or accounting information and a longer sign-up process. The sale of these products is still heavily reliant on Standard Bank’s branch network.  

Jewell explained that the products placed on the banking app have shown tremendous growth, with its Flexi Funeral product nearing one million policies and growing at 50% year-on-year. 

This is far from Liberty’s only benefit. As a part of Standard Bank, it will now have access to an immense amount of transactional banking data. 

Access to banking data enables Liberty to offer more targeted products and allows its advisors to give better advice to clients. 

Crucially, anonymised transaction data enables the company to enhance its underwriting engines. 

“Many life insurers just do not have access to that kind of data to augment and supplement their existing insurance data to create an enhanced product offering and more efficient underwriting,” Jewell said. 

The ultimate goal of both these processes – the cross-selling of products and sharing of data – is to create a single platform for Standard Bank’s clients to engage with all their financial needs. 

This is still some time away, but good progress is being made, Jewell said. Once the company gets it right in South Africa, it will look to offer a similar platform across Africa. 

The Liberty business now falls under Standard Bank’s Insurance and Asset Management division, which has ambitions to become the dominant player in South Africa. 

With Liberty now in-house, Standard Bank has over R1.4 trillion in assets under management. The majority is housed in Stanlib, which is the country’s largest fixed-income and property investor. 

Standard Bank South Africa’s head of investment solutions, Duncan Wattam, said this is vital, as asset managers can no longer stand alone as businesses due to the rise of low-cost index funds.

This forces them to find new distribution channels and, ultimately, be profitable as part of a full-service financial institution. 

Wattam also explained that Standard Bank wants to align its business with its global peers, which generate more than 20% of its earnings from asset and wealth management. 

Asset management is very attractive for banks. It enables them to reduce their reliance on net interest income from loans and increases their return on equity, making their businesses more capital efficient. 

Wattam emphasised that Standard Bank is making substantial investments in its investment platforms to compete with other asset managers and better integrate its products. 

Africa’s insurance and asset management market is also relatively untapped, with the region proving difficult to penetrate. 

African financial systems remain relatively unsophisticated, with many citizens still unbanked and lacking access to financial products. 

While Standard Bank has made strong progress in growing its banking services across Africa, insurance and asset management has lagged behind. 

Liberty’s incorporation into the Standard Bank Group enables it to sell insurance and asset management products through its banking channels in Africa.